Question: I was married for decades to my ex-husband before we divorced. His family is wealthy and I believe I was included in his mom’s trust as a beneficiary. She recently passed away. My husband remarried shortly after our divorce and the new wife is saying she is the beneficiary because Mom’s trust says my ex-husband and his “spouse” are beneficiaries. She says she is his spouse now and therefore entitled to the estate. Who is right?
Answer: As so many of my attorney friends would say, “It depends.” When you divorced, did the settlement agreement reference future inheritances? If so, that agreement most likely trumps anything in your ex-mother-in-law’s trust. The second consideration is when the trust that includes “spouse” was signed. If the document was signed while you and your husband were married, you may have a claim to part of her estate. Speak with an estate attorney who can review the document and some recent court cases that are on point.
While on the topic of inheritance and ex-spouses, we see something far too often in estate administration that is worth mentioning here. When spouses divorce, the settlement agreement usually addresses how IRAs and life insurance are divided. Sometimes an ex-spouse remains the beneficiary of these kinds of assets and other times they do not. If you are divorced, be sure the beneficiary designations on these kinds of assets are accurately updated. This needs to be done with the issuing companies and be sure to get confirmation of the change. If you fail to update the beneficiary designation and even though you may execute a will or a trust that cuts out your former spouse, an old beneficiary designation on an IRA or life insurance plan will usually prevail over a new will.
Question: I live with my longtime friend in a house that was given to me by my mom. We are both elderly and need support and care. This care is extremely expensive and we are running out of money. We have been approached by a couple who have offered to buy our house for what I think is a reasonable amount. They agreed to let us live here until one of us dies, and then the other would have to move out within three months. I think this is a good deal. My friend is older than me and in bad health so I am thinking when he dies, I will move to a senior facility. With the money from the sale of the house, I should have plenty to live on. What am I not seeing?
Answer: This could be the perfect solution for you but, I beg you to have this transaction reviewed by a lawyer. Are you sure it is the right price? Was an appraisal done? What if you die before your friend dies? He will have three months to move. Is he up for that? Have you investigated the buyers? If the buyers have legal judgments or tax liens against them, those creditors could force the sale of the house once it is in their name. Then you both would be on the street. What about capital gains taxes? If you inherited the house from your mom, there will most likely be significant tax due on sale. As I said, it could be the right deal for you, but have it reviewed carefully by your legal counsel.
Liza Horvath has over 30 years’ experience in the estate planning and trust fields and is a Licensed Professional Fiduciary. Liza currently serves as president of Monterey Trust Management. This is not intended to be legal or tax advice. If you have a question, call (831)646-5262 or email firstname.lastname@example.org
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